What Is A Credit Score?
Your credit score is a three digit number that credit lenders will use to help them determine your ability to repay or loan or line of credit. A credit score can range from 300-850 and a score greater than 700 is typically considered “Good”.
Generally, the higher your credit score the more likely you are to qualify for loans and credit. Typically, the higher your credit score, the lower your interest rate will be. This is important as it will save you money in interest over the duration of your loan.
If you have a lower than desired credit score, you are not alone. According to credit.com, the average credit score in America is 703. Market Watch references a new study that shows 59% of Americans have a credit score of 700 or higher. This means that 41% of Americans have a credit score below 700 or less than “Good”.
3 Tips to Raise Your Credit Score Fast!
If you have a less than desirable credit score, it is important to begin taking the steps necessary to improve it right away. Raising your credit score can only be done over time and no matter the steps taken, you will not see immediate results. This does not mean, however, that steps can’t be taken to improve it quickly – it can be done. Here are out top tips to help you improve your credit score in a hurry!
Take a look at these “3 Steps to Improve Your Credit Score Fast”. We have them ranked in order of importance.
#1 – Pay Your Bills on Time and Avoid Late Payments
When you apply for a loan or line of credit, they lender will pull your credit score. This will tell the lender how likely you are to pay back that loan in full, as well as on time. Each time you make a late payment or miss a payment on an existing line of credit, your score will take a hit. On the other hand, each time you make a payment on time, your credit score will improve as it shows your ability to pay back your loans and credit on time and in a responsible fashion.
Always make the minimum payment, at minimum. I have an additional tip that is incredibly helpful in paying off your credit card debt which I will share below.
#2 – Pay Down Your Debt and Keep Balances Low on Revolving Credit
Your credit utilization ratio is just one of many important factors in determining your credit score. You find this ratio by taking the amount of credit used and diving it by the amount of credit available.
For example: If you have have a credit card with a limit of $10,000 and have a balance of $4,000 your credit utilization ratio would be 40%.
Typically a lender will prefer to see less than 40% and the lower the better. Having low credit utilization displays your ability to repay money borrowed on credit rather than letting your balance grow due to being unable to pay down the loan.
#3 – Only Apply For New Credit Inquiries When Necessary
Believe it or not, every time you inquire about a new line of credit your credit score is negatively affected. There are two categories of credit inquires – hard and soft inquiries.
Hard Inquiry: This occurs when you apply for credit or a loan and the lender checks your credit report as a tool to help them determine if you would be trusted to repay the loan.
Soft Inquiry: This occurs when you personally check your credit score. Lenders will also do a soft inquiry to pre-approve you for a loan.
A hard inquiry will typically negatively affect your credit score so having an abundance of these in a short period of time is not recommended. This type of credit inquiry will stay on your credit report for around 2 years, however, the impact on your credit score lessens over that period of time.
A soft credit inquiry does not have an impact on your credit score.
Editor’s Tip: How To Pay Off Credit Card Debt Faster
Paying off your credit card debt can be overwhelming, especially if you have high balances and multiple accounts. Do you find yourself getting frustrated that when you pay each account each month that the balances do not seem to move much? Try this….
When deciding which accounts to pay down first, ignore the interest rate. The tendency for most people (and logically it makes sense) is to pay down the account with the highest interest rate first. Here is why there is a better way.
Have you ever paid off any account in full and felt that instant sense of satisfaction? Feels freaking great doesn’t it? One less monthly bill to worry about and now you feel like you can focus those funds on another account?
Pay off your account with the smallest balance first, regardless of what the interest rate is. It is important that you do this because you will be able to pay off that account faster than a larger account. This gives you that feeling of satisfaction. That is a powerful feeling.
Once you have paid off the smallest account, move to the next smallest account. Continue repeating this until all of your accounts are paid down. It is important to allow yourself to feel those victories along the way.
In the end, you will likely pay off your accounts faster because you will stay engaged and motivated to do so, striving for that feeling all along the way.